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For example, a depreciation expense of per year for five years may be recognized for an asset costing Depreciation is technically a method of allocation, not valuation,[3] even though it determines the value placed on the asset in the balance sheet. Any business or income producing activity[4] using tangible assets may incur costs related to those assets.

There are several standard methods of computing depreciation expense, including fixed percentage, straight line, and declining balance methods. Generally the cost is allocated, as depreciation expense, among the periods in which the asset is expected to be used. The asset is referred to as a depreciable asset.

Depreciation is any method of allocating such net cost to those periods in which the organization is expected to benefit from use of the asset. In determining the profits net income from an activity, the russian dating nyc from the activity must be reduced by appropriate costs. The business then records depreciation expense in its financial reporting as the current period's allocation of such costs.

This expense is recognized by businesses for financial reporting and tax purposes. One such cost is the cost of assets used but not immediately consumed in the activity.